Parth Shah
01 March 2020 at 00:37

Income tax on Foreign income

Hi,

I am an Indian citizen and came to USA for work (job) on 5-Oct-2019. I understand that I will be considered a resident for tax filing in India because I have spent more than 183 days in the 2019-2020 financial year. Due to this I will also have to pay taxes on the income earned in the USA after getting the tax credit (as per "Double Tax avoidance agreement") for the tax that I have already paid for the salary income in USA. However, financial year in the USA is from January to December whereas in India its April to March. So the tax return documents in USA would only have the details of income and taxes paid till December 2019.
Do we show the income earned in USA only till December-2019 (as mentioned in USA tax return documents) or all the income till March-2020? If the total income till March-2020 is shown then how do I show the taxes paid from Jan-2020 till March-2020? Which document would have these details? If we declare the total income earned in USA till March-2020 but taxes only till December 2019 (per USA tax return documents), then I might end up paying double taxes for the foreign income earned in USA for Jan-20 to March-20 period. Please advice.

I hope I am making sense. Refer the example below for more clarity over the question:

Before coming to USA, lets say I had a taxable income of 7 lakhs in India from April to September 2019. In USA I am earning $5000 and roughly paying $1500 as tax per month. This makes my net take home USA salary as $3500 per month after taxes. The USA tax documents would say my income is $15000 and taxes are $4500 for a period of Oct-2019 to December-2019. However, the total income I have earned from Oct-19 to March-20 is $30000 (5000 x 6) and total taxes paid are $9000 (1500 x 6). In this scenario to avoid paying double taxes either we can show the total income (30,000) and total taxes (9,000) for foreign income when filing returns in India for FY2019-20 or show the income as $15000 and taxes as $4500 for the period of Oct to December 2019 only.

Also which ITR will I have to file for such a tax return in India?

Please advice. Thank you in advance for taking out time to read this and respond.


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